CHAPTER 20.7
THIRD PARTY HEALTH INSURANCE ADMINISTRATORS

(1) "Administrator" means a person who directly or indirectly solicits or effects coverage of, underwrites, collects charges or premiums from, or adjusts or settles claims on residents of this state, or residents of another state from offices in this state, in connection with life or health insurance coverage or annuities, except any of the following:

(i) An employer on behalf of its employees or the employees of one (1) or more subsidiaries or affiliated corporations of such employer;

(ii) A union on behalf of its members;

(iii) An insurer which is authorized to transact insurance in this state with respect to a policy lawfully issued and delivered in and pursuant to the laws of this state or another state;

(iv) A producer licensed to sell life or health insurance in this state, whose activities are limited exclusively to the sale of insurance;

(v) A creditor on behalf of its debtors with respect to insurance covering a debt between the creditor and its debtors;

(vi) A trust and its trustees, agents and employees acting pursuant to such trust established in conformity with 29 U.S.C. section 186;

(vii) A trust exempt from taxation under section 501(a) of the internal revenue code, its trustees and employees acting pursuant to such trust, or a custodian and the custodian's agents or employees acting pursuant to a custodian account which meets the requirements of section 401(f) of the internal revenue code;

(viii) A credit union or a financial institution which is subject to supervision or examination by federal or state banking authorities, or a mortgage lender, to the extent they collect and remit premiums to licensed insurance producers or authorized insurers in connection with loan payments;

(ix) A credit card issuing company which advances for and collects premiums or charges from its credit card holders who have authorized collection if the company does not adjust or settle claims;

(x) A person who adjusts or settles claims in the normal course of that person's practice or employment as an attorney at law and who does not collect charges or premiums in connection with life or health insurance coverage or annuities;

(xi) An adjuster licensed by this state whose activities are limited to adjustment of claims;

(xii) A person who acts solely as an administrator of one (1) or more bona fide employee benefit plans established by an employer or an employee organization, or both, for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974 (ERISA). Such a person shall comply with the requirements of section 12G; or

(xiii) A person licensed as a managing general agent in this state, whose activities are limited exclusively to the scope of activities conveyed under such license.

(2) "Affiliate" or "affiliated" means an entity or person who directly or indirectly through one (1) or more intermediaries, controls or is controlled by, or is under common control with a specified entity or person.

(3) "Commissioner" means the commissioner of insurance.

(4) "Control" shall have the same meaning as that term is defined in section 27-35-1(c) of chapter 27-35.

(5) "Insurance" or "insurance coverage" means any coverage offered or provided by an insurer.

(6) "Insurer" shall include all persons, firms or corporations offering and/or insuring health services on a prepaid basis, including, but not limited to, policies of accident and sickness insurance, as defined by chapter 18 of title 27, nonprofit hospital or medical service plans, as defined by chapters 19 and 20 of title 27, or any other entity whose primary function is to provide diagnostic, therapeutic or preventive services to a defined population on the basis of a periodic premium. It shall include all persons, firms or corporations providing health benefits coverage for employees on a self-insurance basis without the intervention of other entities. Insurer does not include a bona fide employee benefit plan established by an employer or an employee organization, or both, for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974.

(7) "Underwrites" or "underwriting" means, but is not limited to, the acceptance of employer or individual applications for coverage of individuals in accordance with the written rules of the insurer; the overall planning and coordinating of an insurance program; and the ability to procure bonds and excess insurance.

(b) The written agreement shall include a statement of duties which the administrator is expected to perform on behalf of the insurer and the lines, classes or types of insurance for which the administrator is to be authorized to administer. The agreement shall make provisions with respect to underwriting or other standards pertaining to the business underwritten by the insurer.

(c) The insurer or administrator may, with written notice, terminate the written agreement for cause as provided in the agreement. The insurer may suspend the underwriting authority of the administrator during the pendency of any dispute regarding the cause for termination of the written agreement. The insurer shall fulfill any lawful obligations with respect to policies affected by the written agreement, regardless of any dispute between the insurer and the administrator.

(b) The commissioner shall have access to books and records maintained by an administrator for the purposes of examination, audit and inspection. Any documents, materials or other information in the possession or control of the department of business regulation that are furnished by a third party administrator, insurer, producer, or an employee or agent thereof acting on behalf of the third party administrator, insurer or producer, or obtained by the commissioner in an investigation shall be confidential by law and privileged, shall not be subject to chapter 38-2 of the general laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The commissioner is nevertheless authorized to use such documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties.

(c) Neither the commissioner nor any person who received documents, materials or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials or information subject to subsection (b) of this section.

(d) In order to assist in the performance of the commissioner's duties, the commissioner:

(1) may share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subsection (b), with other state or federal regulatory agencies, with the National Association of Insurance Commissioners, its affiliates or subsidiaries, and with state, federal and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged statutes of the document, material or other information; and

(2) may receive documents, materials or information, including otherwise confidential and privileged documents, materials or information, from the National Association of Insurance Commissioners, it affiliates or subsidiaries, and from regulatory and law enforcement officials or other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information;

(e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (d).

(f) Nothing in this chapter shall prohibit the insurance commissioner from releasing final, adjudicated actions including for cause terminations that are open to public inspection pursuant to chapter 38-2 to a database or other clearinghouse service maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries of the National Association of Insurance Commissioners.

(g) The insurer shall own the records generated by the administrator pertaining to the insurer. However, the administrator shall retain the right to continuing access to books and records to permit the administrator to fulfill all of its contractual obligations to insured parties, claimants and the insurer; and

(h) In the event the insurer and the administrator cancel their agreement; notwithstanding the provisions of subsection (a) of this section, the administrator may, by written agreement with the insurer, transfer all records to a new administrator rather than retain them for five (5) years. In such cases, the new administrator shall acknowledge, in writing, that it is responsible for retaining the records of the prior administrator as required in subsection (a) of this section.

(b) It is the sole responsibility of the insurer to provide for competent administration of its programs.

(c) In cases where an administrator administers benefits for more than one hundred (100) certificate holders on behalf of an insurer, the insurer shall, at least semi-annually, conduct a review of the operations of the administrator. At least one (1) such review shall be an on-site audit of the operations of the administrator.

(b) If charges or premiums deposited in a fiduciary account have been collected on behalf of or for one (1) or more insurers, the administrator shall keep records clearly recording the deposits in and withdrawals from the account on behalf of each insurer. The administrator shall keep copies of all the records and, upon requests of an insurer, shall furnish the insurer with copies of the records pertaining to the deposits and withdrawals.

(c) The administrator shall not pay any claim by withdrawals from a fiduciary account in which premiums or charges are deposited. Withdrawals from the account shall be made as provided in the written agreement between the administrator and the insurer. The written agreement shall address, but not be limited to, the following:

(1) Remittance to an insurer entitled to remittance;

(2) Deposit in an account maintained in the name of the insurer;

(3) Transfer to and deposit in a claims paying account, with claims to be paid as provided for in subsection (d) of this section;

(4) Payment to a group policyholder for remittance to the insurer entitled to such remittance;

(5) Payment to the administrator of its commissions, fees or charges; and

(6) Remittance of return premium to the person or persons entitled to such return premium.

(d) All claims paid by the administrator from funds collected on behalf of or for an insurer shall be paid only on drafts or checks of and as authorized by the insurer.

(b) This section shall not prevent the compensation of an administrator from being based on premiums or charges collected or the number of claims paid or processed.

(b) When an administrator collects funds, the reason for collection of each item must be identified to the insured party and each item must be shown separately from any premium. Additional charges may not be made for services to the extent the services have been paid for by the insurer.

(c) The administrator shall disclose to the insurer all charges, fees and commissions received from all services in connection with the provision of administrative services for the insurer, including any fees or commissions paid by insurers providing reinsurance.

(b) Applicants to be an administrator shall make an application to the commissioner upon a form to be furnished by the commissioner. The application shall include or be accompanied by the following information and documents:

(1) All basic organizational documents of the administrator, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement and other applicable documents and all amendments to such documents;

(2) The bylaws, rules, regulations or similar documents regulating the internal affairs of the administrator;

(3) The names, addresses, official positions and professional qualifications of the individuals who are responsible for the conduct of affairs of the administrator; including all members of the board of directors, board of trustees, executive committee or other governing board or committee; the principal officers in the case of a corporation or the partners or members in the case of a partnership or association; shareholders holding directly or indirectly ten percent (10%) or more of the voting securities of the administrator; and any other person who exercises control or influence over the affairs of the administrator;

(4) Annual financial statements or reports for the two (2) most recent years which prove that the applicant is solvent and such information as the commissioner may require in order to review the current financial condition of the applicant;

(5) A statement describing the business plan including information on staffing levels and activities proposed in this state and nationwide. The plan must provide details setting forth the administrator's capability for providing a sufficient number of experienced and qualified personnel in the areas of claims processing, record keeping and underwriting;

(6) If the applicant will be managing the solicitation of new or renewal business, proof that it employs or has contracted with an agent licensed by this state for solicitation and taking of applications. An applicant that intends to directly solicit insurance contracts or to otherwise act as an insurance producer must provide proof that it has a license as an insurance producer in this state; and

(7) Such other pertinent information as may be required by the commissioner.

(c) The applicant shall make available, for inspection by the commissioner, copies of all contracts with insurers or other persons utilizing the services of the administrator.

(d) The commissioner may refuse to issue a certificate of authority if the commissioner determines that the administrator, or any individual responsible for the conduct of affairs of the administrator as defined in subsection (b)(3) of this section, is not competent, trustworthy, financially responsible or of good personal and business reputation, or has had an insurance or an administrator license denied or revoked for cause by any state.

(e) A certificate of authority issued under this section shall remain valid, unless surrendered, suspended or revoked by the commissioner, for so long as the administrator continues in business in this state and remains in compliance with this chapter.

(f) An administrator is not required to hold a certificate of authority as an administrator in this state if all of the following conditions are met:

(1) The administrator has its principal place of business in another state;

(2) The administrator is not soliciting business as an administrator in this state;

(3) In the case of any group policy or plan of insurance serviced by the administrator, the lesser of five percent (5%) or one hundred (100) certificate holders reside in this state.

(g) A person is not required to hold a certificate of authority as an administrator in this state if the person exclusively provides services to one (1) or more bona fide employee benefit plans each of which is established by an employer or an employee organization, or both, and for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974. These persons shall register with the commissioner annually, verifying their status as herein described.

(h) An administrator shall immediately notify the commissioner of any material change in its ownership, control or other fact or circumstance affecting its qualification for a certificate of authority in this state.

(i) No bonding shall be required by the commissioner of any administrator whose business is restricted solely to benefit plans which are either fully insured by an authorized insurer or which are bona fide employee benefit plans established by an employer or any employee organization, or both, for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974.

(b) The annual report shall include the complete names and addresses of all insurers with which the administrator had an agreement during the preceding fiscal year.

(c) At the time of filing its annual report, the administrator shall pay a filing fee as required by the commissioner.

(1) in an unsound financial condition;

(2) using such methods or practices in the conduct of its business so as to render its further transaction of business in this state hazardous or injurious to insured persons or the public; or

(3) has failed to pay any judgment rendered against it in this state within sixty (60) days after the judgment has become final.

(b) The commissioner may in his or her discretion, suspend or revoke the certificate of authority of an administrator if the commissioner finds that the administrator:

(1) has violated any lawful rule or order of the commissioner or any provision of the insurance laws of this state;

(2) has refused to be examined or to produce its accounts, records and files for examination, or if any of its officers has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to an examination, when required by the commissioner;

(3) has, without just cause, refused to pay proper claims or perform services arising under its contracts or has, without just cause, caused covered individuals to accept less than the amount due them or caused covered individuals to employ attorneys or bring suit against the administrator to secure full payment or settlement of such claims;

(4) is affiliated with or under the same general management or interlocking directorate or ownership as another administrator or insurer which unlawfully transacts business in this state without having a certificate of authority;

(5) has at any time failed to meet any qualification for which issuance of the certificate could have been refused had such failure then existed and been known to the department;

(6) has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld; or

(7) is under suspension or revocation in another state.

(c) The commissioner may in his or her discretion and without advance notice or hearing, immediately suspend the certificate of an administrator if the commissioner finds that one (1) or more of the following circumstances exist:

(1) The administrator is insolvent or impaired;

(2) A proceeding for receivership, conservatorship, rehabilitation or other delinquency proceeding regarding the administrator has been commenced in any state; or

(3) The financial condition or business practices of the administrator otherwise pose an imminent threat to the public health, safety or welfare of the residents of this state.

(d) If the commissioner finds that one (1) or more grounds exist for the suspension or revocation of a certificate of authority issued under this part, the commissioner may, in lieu of suspension or revocation, impose a fine upon the administrator.